Philippine stocks may reaccelerate into year-end


While derailed by a host of negatives, the rally may be set to regain momentum on earnings and GDP
Newsfeed18 Nov 2019
Photo credit: AFP Photo


Market news selected by the DBS Chief Investment Office


REST OF ASIA

Knocked off course by a host of negatives, the Philippine stock rally may be set to regain momentum into year-end on improvement in the domestic economy and corporate profits.

The Philippine Stock Exchange Index (PSEi) has breached the 8,000 mark 13 times this year only to fall back through, hurt by factors including the US-China trade war and the MSCI’s index rebalancing. But holiday spending combined with cooling inflation, a stronger peso, and a gross domestic product boost from increased state spending provide reasons to be hopeful, investors say.

“We could still see a Santa Claus rally,” a fund manager. There is a “stronger possibility” for the PSEi to reach 8,400 given good third-quarter earnings and “building anticipation that the last quarter could even be better,” he said.

Earnings per share of companies in the benchmark index grew 22.6% in July to September, picking up the pace from 16.7% and 13.5% in the preceding two quarters, said an analyst.

The benchmark gauge has slumped 3.5% from its recent peak of 8,216.68 on 5 November, as overseas investors were net sellers for eight straight days. The selloff should taper as international investors complete adjustments related to the MSCI’s increased weighting of mainland China shares at the expense of other markets, said a researcher. – Bloomberg News.

Australia stocks were lower on Monday (18 November) morning with the S&P/ASX 200 Index down 0.27% to 6,775.50. The benchmark climbed 0.87% to 6,765.10 on Friday.

South Korea’s Kospi Index added 0.06% to 2,163.46 at the open on Monday. It rose 1.07% to 2,162.18 the previous session.

The Taiwan Stock Exchange Weighted Index gained 0.66% to 11,525.60.


MAINLAND CHINA & HONG KONG

China’s central bank said it will “increase counter-cyclical adjustment” to ward off downward pressure on the economy, while staying vigilant on the possibility of expectations that inflation may spread.

The economy faces greater difficulties as investment growth slows and industrial production remains sluggish, the People’s Bank of China (PBOC) said in its third quarter monetary policy report released Saturday (16 November). The central bank highlighted an increase in challenges from the previous report in August and renewed its concern on inflation risks.

“It should be noted that the current external environment is complex, the economy is under rising downward pressure, and some businesses are faced with operating difficulties,” the PBOC said.

The report signals that the central bank faces limited scope for policy manoeuvres despite the increasing economic risks. The PBOC will remain committed to a targeted, constrained approach toward easing. It repeated an earlier pledge to continue to cut the amount of money banks need to put aside as reserves to ease credit.

Monetary policy will “properly handle the short-term pressure”, making sure not to offer excessive funding, while keeping an eye on the risk of expectations that inflation may spread, the report said.

China’s consumer price index rose to a seven-year high of 3.8% in October and could continue to climb on the high pork prices. The situation “must be drawn to attention and properly handled”, since it can affect people’s cost of living, the PBOC said, adding that it expects inflation pressure to gradually decline in the second half of next year. – Bloomberg News.

The Shanghai Composite Index fell 0.64% to 2,891.34 on Friday. The Hang Seng Index was little changed at 26,326.66.


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